Local People, Local Products Make Co-ops Successful

Small, offbeat, quirky: These are the words that have often been used by mainstream food retailers to describe food co-ops.

It might be time to update the lexicon. How about: Community-oriented, hyper-local, growing larger? In other words, neighborhood food cooperatives are fast becoming a force to be reckoned with — on several levels.

All the evidence is contained in a new report out from the National Cooperative Grocers Association. The study, “Healthy Foods, Healthy Communities,” provides a first-ever glimpse into what makes the food cooperative such a viable business model.

“It’s the first time we’ve ever this kind of quantitative research to back up what we’ve believed and have known in our minds for some time,” says Robynn Shrader, executive director of the NCGA.

Researchers poured their data into three buckets: Food, environment and people. Each one highlights the unique differences that co-ops bring to the community, Shrader told us during a recent phone interview.

Some key findings include:

For every $1,000 a shopper spends at their local food co-op, $1,604 in economic activity is generated in their local economy — 1.5 times more than if they had spent that same $1,000 at a conventional grocer.

Sixty-eight percent of co-op employees are eligible for health insurance, compared to 56% of workers at conventional grocery stores.

Co-op employees earn an average of nearly $1 more per hour than conventional grocery workers when bonuses and profit sharing are taken into account.

Co-ops work with an average of 157 local farmers and producers, versus 65 at conventional grocers.

Of produce sales at food co-ops, 82% are organic, compared to 12% for conventional grocers.

Organics make up 48% of total grocery sales in food co-ops, compared to just 2% in conventional grocers.

Granted, any organization is going to spin a study that they commissioned to their advantage. But even then, the numbers hold a good amount of unbiased truth.

For example, look at the local farm count (157 for co-ops vs. 65 for conventional supermarkets). Owned by local residents, food cooperatives are naturally community focused, which means sourcing from local food systems.

“Co-ops are there to provide great food, but they’re also there to provide a support system within the community,” Shrader notes. “The ownership relationship to consumers is what’s given us a real distinct marketing advantage.”

Local foods have become a multi-billion-dollar growth category for supermarkets. In order to participate in the trend, however, large retailers have had to redefine the term “local” to match their internal needs. High-volume items like corn and tomatoes might need a three-state source zone. Consumers might not be reassured that their local Silver Queen ears came from two states away.

The study found that two-thirds of NCGA co-ops define local as either within their state, within a multi-county region, or within 100 miles. In the conventional grocery sector, slightly less than half of operators use this same definition.

At co-ops, purchasing decisions are made at the store level, and their organizational structure enables them to work closely with local growers and producers to establish sustainable business relationships.

“The ownership model is the strength and the connection of local,” said Shrader. “Co-ops are owned by their consumers, so there’s a relationship and a sense of loyalty that you wouldn’t have with conventional grocery.”

The business model on which co-ops are fashioned allows this class of retailers to narrow their focus so they can meet their shoppers’ needs. It’s somewhat ironic that it’s often the exact opposite of what large operators tend to do.